PMAY Update in 2018: GST reduced on houses under PMAY 

Home buyers availing the Credit Linked Subsidy Scheme [CLSS] scheme under Pradhan Mantri Awas Yojana [PMAY] for purchasing homes can heave a sigh of relief. The GST council has proposed that the Goods and Services Tax prevailing on these homes will reduced.

All under construction projects which are a part of CLSS will see a 4 percent cut in GST and will be charged at 8 percent instead of 12 percent.

Buyers who do not qualify for CLSS will continue to pay the same i.e GST at 12 percent for the same house.

Low-cost housing projects, where the maximum carpet area of units is 646 sq.ft. and have been given infrastructure status as per affordable housing definition, also fall under this GST benefit.

There has also been a change in the carpet area of houses for Middle Income Group falling under PMAY. In November, the cabinet approved that for:

-MIG-I category, the unit size was increased from 90 sq.m. to 120 sq.m.

-MIG-II category, the unit size was increased from 110 sq.m to 150 sq.m.

* Update as of June 12, 2018*

Earlier the eligibility of carpet area was 1291 sq. ft. for MIG-I and 1614 sq. ft. for MIG-II. This has now been enhanced to 1722 sq.ft. and 2153 sq.ft. 

The reduction in GST along with the interest subvention scheme will result in a significant amount of saving for buyers while purchasing homes under PMAY-CLSS. These segments of home buyers are price sensitive and even a small change makes a considerable impact on their budget and hence influences their decision to buy a home.

This scheme is expected to convince developers to pass on their savings in terms of Input Tax Credit on construction, raw materials to home buyers, reducing the actual rate they have to pay for their home.


Pradhan Mantri Awas Yojana- Credit Linked Subsidy Scheme: Explained

1. Pradhan Mantri Awas Yojana (PMAY) caters to urban centres and was launched in the year 2015 with an aim of providing ‘Housing for All by year 2022’.

2. In 2017, the scope of the PMAY was broadened by the introduction of the Credit Linked Subsidy Scheme (CLSS) . Under the scheme the Government of India is offering interest subsidy on home loans taken by eligible citizens for buying or constructing a house. Furthermore,the scheme brings down the outstanding loan amount right at the time of loan origination.

3. It is for the first time under the scheme that any national government has recognized the Middle Income Category (MIG) as the ones needing some sort of financial support in their quest for a home.

4. The Credit Linked Interest Subsidy Scheme (CLSS) for Middle Income Group widens the scope of people who qualify as beneficiaries. People earning above Rs 6.00 lakh and up to Rs 18 lakh per annum are eligible for interest subsidy on housing loans.

5. The following percentage of interest subsidy is available if the criterion are met:

– 4% on housing loans of up to Rs 9 lakh of those with an income of INR 6 to 12 lakh a year (MIG 1 Category)

– 3% on housing loans of up to Rs 12 lakh of those earning INR 12 to 18 lakh per annum (MIG 2 Category)

6. Irrespective of one’s amount of loan, as long as the unit sizes comply with the norms laid down, the beneficiaries will avail the interest subsidy under the CLSS up to the limits described above. The norms for the unit sizes are: 90 sq. m. for MIG1and 110 sq. m. for MIG 2. These are carpet area of the unit that is being purchased.

7. The interest subsidies will bring down the Equated Monthly Installments (EMI) of beneficiaries by a certain amount per month. The government will provide direct transfer of these savings over the life of the loan as a one-time benefit at the time of loan origination. Assuming the normal housing loan rate to be fixed at 8.65% on a 20 year loan, the potential savings are:

-Rs 2.35 lakh on a loan of Rs 9.00 lakh in the MIG 1 category

-Rs 2.30 lakh on a loan of Rs 12.00 lakh in the MIG 2 category

8. The home loan that one avails to qualify under the scheme will be for tenure of 20 years or lower.

9. The criteria to qualify under the PMAY CLSS scheme are: a) one should be a first time home buyer; b) the income should be as per the aforementioned limit and c) the dwelling sizes should comply with the norms.

10. The interest subsidy is applicable only to the amount limit mentioned in the scheme. If the loan amount is more, interest on the remaining amount is applicable as per contract.


Rohan Abhilasha under constructionRohan Abhilasha under construction

Rohan Abhilasha under construction
Rohan Abhilasha under construction- these homes qualify under PMAY

Rohan Abhilasha under constructionRohan Abhilasha under construction

Rohan Abhilasha under construction
Rohan Abhilasha under construction- these homes qualify under PMAY